Brett Furman from the Brett Furman Group to present the monthly marketing report. This update is very important since I will provide my thoughts on the direction of the residential housing market in the counties of Chester, Delaware, Montgomery & Philadelphia counties. What I was trying to understand is what is going to happen when the stay at home orders are lifted.
Saying the economic news has been disconcerting would be an understatement. Statistics concerning unemployment figures of about 15%, business closures, and retail failures have pointed to upheaval in the global economy as a result of social distancing measures, which were put in place by governments to contain the global COVID-19 pandemic.
Pennsylvania is the only state in the country that defines real estate as non-life-sustaining which forced real estate companies to close their physical locations and stop showing houses. That only left Realtors with virtual selling methods if they wanted to continue to sell homes.
My recent study compared the rate of agents that were using virtual tours versus those that used them in 2014. The results revealed that these methods were still not being used by 65% of all agents. This means that it makes it very hard for most sellers to sell right now since they don’t have a virtual tour.
While we could argue that housing is a vital part of people’s lives, we can better explain the factors by looking at the statistics.
First the stats:
Buyers can pick from 8382 homes that are available in Chester, Delaware, Montgomery & Philadelphia Counties
These four counties had 41,806 homes sold over the past 12 months with significant price increases:
Average Sale Price
5/10/19 – 5/9/20 Price Change
Chester County – $405,605 4.27%
Delco County – $295,169 6.43%
Mont County – $357,041 7.00%
Phila County – $275,646 6.08%
Now for the interpretation and the good news. While this data would be contrary to what you would think. We are clearly in a sellers’ market based upon very low absorption. On average right now it will take the market 66 days or about two months to absorb or sell the inventory. This does not mean your home will be sold in 66 days if you put it on the market but rather this is my barometer to measure how the market is doing. I perform this analysis for every single property that we list for sale. This data is critical before you can discuss a price strategy you must understand this analytic.
The best way to figure out what will happen when the stay at home order is lifted is to examine the shadow inventory.
Shadow inventory is broadly defined as homes that are temporarily off the market.
Shadow Inventory refers to homes that sellers previously had on the market and have decided to temporarily remove them from the market.
They did this for two reasons
1. They did not want anyone traipsing through their property.
2. They did not want to toll days on the market since agents were not permitted to conduct home tours.
I have identified 1,859 shadow inventory homes which represent about 22% of the active inventory. If all these homes came on the market right now. The absorption would increase from 66 days to 78 days or 2.6 months.
County Quantity of Shadow Homes
Chester County 274 homes
Delco County 262 homes
Mont County 374 homes
Phila County 949 homes
Total -Shadow Inventory 1,859 homes
So, what’s the catch? The catch is the second type of shadow inventory which is the unknown shadow inventory. These homes have not been on the market previously but will come on the market, but we don’t have any way to quantify the amount.
Unknown Shadow Inventory includes these five categories:
- 1.Spring sellers that delayed getting their home on the market.
- 2.People that have been stuck in their home for several months and decided that the home they are living in does not work anymore.
- 3.Divorces – Shelter in place forced couples to spend time together and could spike divorce rates which could lead to home sales.
- 4.Airbnb – Investors that were doing short term rentals that are now empty may be forced to sell.
- 5. Forced sales – Those that lost their job and are economically challenged may be forced to sell.
So, what does all this mean:
Buyers will benefit from low-interest rates but may have challenges finding a home. Sellers will benefit from increased pricing and minimal competition all due to my barometer that we previously discussed known as absorption. The market could shift from a seller’s market to a buyer market depending upon how much shadow inventory comes to market. Therefore, an offer today may be worth more than an offer tomorrow.
Stay safe, practice social distancing, and stay tuned to next month’s market report.